It's summer, and that means most of us have vacation on our minds. Now is a good time for many of us to start thinking about whether or not we need to hire some extra help for our business. For those who may need temporary help for the summer, we already discussed the pitfalls to avoid when hiring interns. If you however, want more experienced, professional assistance, then you have to decide between hiring an employee or an independent contractor.
The issue of "agency" is the one thing I remembered from law school about the difference between and employees and independent contractors. As Jeffrey Steinberger explains, an employee is an agent of the employer. That means an employer is legally responsible for all the negligence and other liability that the employee commits while doing his job. If you hire an independent contractor, however, you will be able to bypass all this liability.
Other reasons why you might be tempted to designate a worker as an independent contractors have to do with your finances. Unlike employees, independent contractors are not entitled to overtime. Not only that, you wouldn't have to worry about contributing to their unemployment, Social Security, and Medicare taxes. When it comes to anti-discrimination laws, independent contractors are not covered so that's one less potential lawsuit you'd have to think about.
So, it's simple...you should just go out and hire only "independent contractors" right? Well, not so fast! It all depends on what your job requirements are. Regardless of how you designate your workers, courts will independently look at certain factors when deciding whether or not someone is truly an employee or an independent contractor. The main thing courts will look at is how much control you, as the business owner, have over them. Again, Jeffrey Steinberger, provides a comprehensive list of what courts examine but the infographic below will at least point most of you in the right direction.
Because designating a worker as an employee or an independent contractor carries tax, discrimination and labor laws consequences, many states are cracking down on employers who deliberately choose to use the wrong label. And, as Minda Zetlin shows, whenever they catch these employers who are trying to "cheat the system", the penalties they levy can be severe.
